A Computable General Equilibrium model

of the Scottish Economy

In addition to funding policy research by think tanks and other organisations, the Scottish Policy Foundation also provides access to a macroeconomic model of the Scottish economy, developed by the Fraser of Allander Institute at the University of Strathclyde, to enable think tanks to test the impact of policy ideas and propositions.

Watch the short video below for an overview of the model, its uses and capabilities.

what is a cge model?

Computable General Equilibrium models are large quantitative models that use both theory and empirical data to evaluate the impact of economic and policy shocks in the economy of a country as a whole and in relation to the rest of the world. They try to emulate the structure of the economy, and all the existing interactions and dependencies among various economic agents within that economy (e.g. Households, producers, the government, etc.), as realistically as possible.

Fraser of Allander Institute

We have teamed up with the Fraser of Allander Institute as the leading provider of the development and ongoing operational support of an inter-regional computable general equilibrium model, to which our grant holders would have access, in order to enrich their policy research papers. PwC are providing technical support and monitoring capability.

The model is a state of the art representation of the Scottish economy, capturing the inter-linkages between the different industrial sectors of the Scottish economy, Scottish households and government. It has been developed over a number of decades and is internationally regarded as one of the best examples of a robust economic model for any devolved/regional economy. The model also draws on the FAI’s rich knowledge and understanding of the Scottish economy.

The framework is ideally suited to assessing the long-term implications – both positive and negative – of changes in public policy. These types of modelling framework have been used extensively by governments and think-tanks to assess the merits of alternative policy choices. Both the Scottish and UK Governments utilise such frameworks.

In the past, FAI analysis has included the costs and benefits of investment in education, the consequences of different tax and government spending choices, the effects of foreign direct investment, developments in particular sectors (such as renewable energy) and the impact of government industrial policies.

If your organisation is interested in accessing the model, please get in contact with our Director, Alison Moore, who will send you a more detailed guide to the model.

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